The asset management of the traditional bank shows a desolate picture. There are also indications that Vontobel also did business with the Austrian real estate entrepreneur René Benko.
The Zurich asset management bank Vontobel is coming up with weak figures.
Ennio Leanza / Keystone
The poor run of the traditional Zurich bank Vontobel continues. The bank was unable to meet the already low expectations of the financial markets in 2023 and is weak in almost all key metrics. The profit after taxes fell to 215 million francs and was far behind the record year of 2021 (384 million).
Investors reacted disappointedly to the bank’s annual figures on Thursday: Vontobel shares lost over 4 percent in value over the course of the day.
Vontobel disappoints investors
Share price in francs
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Presentation of annual figures
Save, save and save some more
The top management of the bank – recently formed by the boss duo Christel Rendu de Lint and Georg Schubiger – reacts sharply. Vontobel announces that it will save 100 million francs over the next three years. This corresponds to a tenth of the bank’s total costs. Since the majority of costs in banking relate to personnel, it is roughly estimated that a tenth of the workforce is also affected. Vontobel currently employs 2,275 people on a full-time basis.
More details about how many jobs Vontobel will cut and which areas will suffer will follow later this year. The head of finance, Thomas Heinzl, only suggests that back office functions have to contribute more proportionately than the customer advisors. A large part of the job cuts will also take place through retirements and voluntary departures.
The cost-cutting exercise is likely to be particularly painful because Vontobel has already reduced costs in most areas by 2023.
New leadership, higher bonuses
The unrest around the top of the bank is not helpful. Only a few months ago and after a long search, Vontobel introduced the new co-CEOs to replace the long-term boss Zeno Staub, who had resigned: Christel Rendu de Lint, the previous head of asset management, and Georg Schubiger, who previously headed the business with wealthy private customers .
The dual leadership was not particularly well received in the market. Many see this as a lazy compromise that satisfies no one. Rendu de Lint and Schubiger nevertheless received the “benefit of the doubt”, after all, they have a lot of experience in their respective areas.
However, what has now raised questions is that the Vontobel management is to receive a significantly higher bonus in cash for 2023: 2.9 million francs after 1.6 million in the previous year, despite a decline in profits. The management now consists of five people instead of just four. The bank management pointed out to the media that the management bonuses had to be determined by the compensation committee of the board of directors and confirmed by the general meeting. Nevertheless, Vontobel chose a very bad time for this wage increase.
Die Benko-Connection
The unrest is increased by the fact that Bank Vontobel is apparently also connected to the failed Austrian real estate king René Benko. The NZZ has documents from the insolvency application of Signa Prime Selection AG, one of Benko’s main companies. They show that Vontobel has a claim in the asset list, with a bank liability of just over 25 million euros. In other words: Signa either owes Vontobel money, or Vontobel is listed as a Signa creditor.
The Tamedia newspapers also reported this Thursday about several financial connections between Vontobel and the Signa Group or René Benko. On the one hand, Vontobel is said to have co-financed the purchase of the iconic Chrysler Building with 10 million euros, but then ceded this claim.
Secondly, the newspaper reports on a claim for 30 million euros that Bank Vontobel asserted against Signa Prime Holding at the end of August 2023. Thirdly, the Laura Private Foundation – named after René Benko’s daughter – is said to have had outstanding debts of 10 million euros against Vontobel in June 2023.
The NZZ has not yet been able to independently verify this information. One thing is clear: Signa managed its financing quite dynamically. Some claims that existed in mid-2023 may have been repaid; new ones emerged.
Vontobel does not comment on its connection to Benko. The bank only writes: “We have not made any write-downs in connection with the recent problems in the real estate sector. Due to the high level of public interest, we would otherwise have disclosed this.” CFO Heinzl said the same thing to the media on Thursday morning.
Business outside of the balance sheet is conceivable
The bank could not have made any write-offs because any Signa loans are not on its own books: Vontobel is, for example via their digital platform Cosmofunding, also works as a financing broker. This means: Even if the name Vontobel appears in the Signa Prime insolvency application, someone else can be the actual creditor.
Whether such brokerage activities put a strain on Vontobel’s reputation depends largely on the role of the bank. Did it, like a trading venue, simply bring lenders and borrowers together? Then you can hardly blame the bank. Or did it actively promote the Signa investments to potential buyers, such as its own customers? This would annoy these customers and could come back to haunt the bank.
According to current knowledge, Vontobel’s commitment to Benko is not comparable to that of Bank Julius Baer. This applies to both the size and type of relationship with Benko as well as the risk taken. The Zurich competitor wrote off 600 million francs a week ago because it gave Signa large and poorly secured loans. The CEO Philipp Rickenbacher resigned.
Even if the risks for Vontobel appear to be limited, the fact that it is now being mentioned together with other “Benko banks” comes at a very bad time.
The one-legged chair
Meanwhile, the bank’s malaise lies in its core business. Asset management for rich private customers held up well despite the strong franc. As with other banks, interest income was bubbling.
The second pillar of Vontobel, on the other hand, is in crisis. Asset management, i.e. the business with professional customers such as pension funds and other banks, is recording declining income for the second year in a row: in 2021 it was 594 million francs, in 2022 it was 457 million. Now the division has reached 384 million.
The explanations from the Vontobel leadership as to why the former parade of discipline is weakening are repeated. Rendu de Lint says that institutional customers continued to invest their money in low-cost passive index funds or money market funds instead of in Vontobel’s higher-priced, actively managed products. Customers particularly stayed away from investments in emerging markets – this is precisely the segment in which Vontobel has traditionally been strong.
The weakness in asset management is not solely the fault of Vontobel’s management. Numerous active asset managers have said that 2023, like 2022, was a difficult year.
After all, customers are said to have generally become more courageous again towards the end of the year because they want to benefit from the high interest rates and are hoping for interest rate cuts soon, especially in the USA. And there are customer groups who have a lot of money on hand that they can invest quickly. The change for the better could happen very quickly. Vontobel expects that its fixed-interest products will perform better in 2024.
Acquisition in the area of private investments
The question that has long been simmering remains open as to whether Vontobel is fundamentally correctly positioned for the new investment world. Can the actively managed products in which the bank specializes become as profitable again as they were until 2021? Passive funds are not going away, and investments in publicly traded companies face competition from private market investments.
The bank has responded by buying a minority stake in the London investment company Ancala. The purchase is expected to be completed in the third quarter. It is not known how much Vontobel will pay and what share of Ancala it will receive in return. However, Vontobel has explained the effect on its own capitalization; Based on this, the purchase price is likely to be a little more than 30 million francs.
Ancala specializes in investing in airports, railway lines and the like. A good future is also predicted for this asset class due to the decarbonization of the economy. But Vontobel is not the first bank that wants to jump on this bandwagon.
Bank Pictet with a decline in profits
amusing · The Geneva-based private bank Pictet also has to cope with a slight setback. It achieved a quarter less consolidated profit in 2023 than in the previous year. The bank, however, identifies two main reasons for the decline in profits to 577 million francs, which have nothing to do with the bank’s actual performance. Firstly, in autumn 2023, Pictet was the last Swiss bank to conclude the tax dispute with the USA with a settlement. She paid the US Department of Justice the equivalent of 107 million francs. Secondly, currency effects weigh on the result.
“We are satisfied with our operating result,” says Renaud de Planta, Pictet’s senior partner. The results in the second half of the year may have appeared mediocre, but the underlying performance of the bank was significantly better. In addition to the DOJ settlement, the strong franc has a particularly negative impact as a special effect: “80 percent of our client assets are invested abroad, while 60 percent of our costs are incurred in Switzerland.”
It is also noticeable that Pictet was only able to attract around 1 billion francs in new money in the second half of the year; significantly less than in the first half of the year (15 billion francs). Renaud de Planta advocates not giving too much weight to net new money in the short term. Over the entire year 2023, and even more so over the past five years, Pictet’s balance sheet is very positive.
In 2023, all four divisions would have recorded positive new money; The bank is therefore broadly supported. In addition, the development of new money is only relevant in conjunction with profitability. Especially in asset management, it is always possible to quickly bring in additional billions with discounts, but this then happens at the expense of the margin. In the longer term, Pictet reports a return on equity of over 20 percent, which is well above the industry average for comparable banks. “From my point of view, that’s more important,” said de Planta.
Pictet, fundamentally similar to Vontobel, operates both private customer business and asset management. The latter also suffered from the weak environment at Pictet.
“The entire industry has been in a challenging phase over the past two years,” says Renaud de Planta. The industry suffered from higher interest rates, which led to lower risk appetite. “We all faced the same headwinds, but have seen clear signs of improvement in the market since the fourth quarter.”